Bozeman Yellowstone International Airport staff worry a bill that would increase the aviation fuel tax could adversely affect air service in Montana, said Deputy Airport Director Scott Humphrey.

House Bill 661, which the House Transportation Committee will consider on Wednesday, would raise the aviation fuel tax by 10 cents and eliminate the 2-cent tax refund airlines receive, effectively requiring them to pay 12 cents more per gallon than they do now.

The tax would fund state aeronautics operations, airport grants and aeronautics education, which have been underfunded for years, said Rep. Geraldine Custer, R-Forsyth, who is sponsoring the bill on behalf of the Montana Pilots Association.

The aviation fuel tax has not increased since 1999. Meanwhile, costs for the Montana Department of Transportation’s Aeronautics Division have climbed, creating a backlog of infrastructure projects, especially at smaller, non-commercial airports, which provide a base for services like law enforcement, air ambulances and firefighting.

The Montana Pilots Association estimates the tax increase will generate $4.2 million annually and will cost about $1 per flight. Custer anticipates airlines will pass the cost on to consumers.

“This is an increase people can absorb and will benefit our airports,” she said.

However, administrators of the Bozeman Yellowstone International Airport view the tax as too high and an ineffective way to improve funding for the state’s Aeronautics Division.

“The community has worked hard to recruit airlines here to Montana, and this bill is counterproductive to what we’ve been striving for,” Humphrey said.

He worries the tax increase is large enough that the small profits airlines make on flights in slower months like January will disappear, causing airlines to reduce the number of seats they bring to Bozeman. He also worries the increase will make it harder for the airport to recruit new flights.

“I don’t think we’re going to lose whole flights,” he said. “The sky isn’t falling, but airlines are carefully watching their revenue and this tax could tip the balance.”

Dax Schieffer, the tourism director for Voices of Montana, a nonprofit dedicated to educating the state on tourism-related issues, said having fewer seats could make travel less convenient and could increase ticket prices because there could be less flight competition. With a higher cost for traveling to Montana, the state could see fewer visitors.

“We think any barrier to creating or maintaining air service is a threat to economic development,” he said.

Instead of increasing the aviation fuel tax, Humphrey suggested the state implement a user fee, so that those who benefit from the airports pay for them.

“There is no doubt state aviation is underfunded, but there are several better funding mechanisms we could use,” he said.

Over the last several years, Montana airports have seen record passenger traffic, reaching 2.2 million passengers last year. Bozeman remains the state’s busiest airport and continues to grow. In January and February, there was a 20 percent increase in passengers over the same months in 2018.

The success of Montana’s airports is partially because local governments provide support to airlines, including through minimum revenue guarantees, which establish a target revenue a carrier receives for a particular service. If the revenue falls below the target, the airline is paid to make up the difference.

“We have a business community, tourists and others who rely on our air service and its consistency,” Humphrey said. “We want people to be able to depend on us during all times of the year, and by having reliable air service, we do see a broader economic benefit to the community.”

Perrin Stein is the county, state and federal government reporter for the Chronicle.

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